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IMAGINE A LIFETIME'S WORTH OF EXECUTIVE WISDOM, BOILED DOWN TO A HANDY POCKET-SIZE GUIDE. CORPORATE LEADERS SWEAR BY IT—BUT IT'S NOT FOR SALE. LUCKY FOR YOU, WE'VE EXCERPTED THE BEST PARTS.

By Paul Kaihla

July 1, 2005

(Business 2.0) – It started decades ago as flashes of insight scribbled on loose scraps of paper. Then it morphed into a PowerPoint presentation that distilled years of business wisdom into a handful of easy-to-remember aphorisms. Last year it became a 76-page spiral-bound booklet clad in a plain gray cover. Eventually, Warren Buffett received a copy—and liked it so much that he asked for dozens more to give to his CEOs, friends, and family.

The tiny handbook has become an underground hit among senior executives and management thinkers. Written by Bill Swanson, CEO of aerospace contractor Raytheon, Swanson's Unwritten Rules of Management is part Ben Franklin and part Yogi Berra, with a dash of Confucius thrown in. Former General Electric CEO Jack Welch says there's something about both the man and his management style that makes the gray book a worthwhile read for any CEO. "It's a neat little manual, and each of these rules makes sense," Welch says. "It covers almost everything, and I like Swanson's feet-on-the-ground approach." Bruce Whitman, president of FlightSafety International, a Berkshire Hathaway company that's one of the world's largest aviation training firms, goes even further: "The book is something you can carry around with you like a Bible and live by every day."

It may not be the Good Book, but it's already done a lot of good. Swanson relied on it to set the tone for the turnaround he's orchestrated at Raytheon. Since landing the company's top job in 2003, he's been cleaning up the messes he inherited—including investigations into accounting practices, the forced exit of the company's CFO, and costly asset write-downs. Swanson handed out copies of Unwritten Rules to 300 of his top managers, and under his leadership Raytheon has put its operations on a more solid footing while delivering revenue and profit growth for six quarters in a row. Today, Raytheon is a $20 billion company with 80,000 employees.

Swanson has a knack for making complex ideas easy to grasp. His folksy rules may seem simplistic, but they point to proven management data. For example, psychologist Daniel Goleman, author of the landmark book Emotional Intelligence, notes that Swanson's imperative to have fun at what you do is a useful way to highlight the fact that the brain's mirror neurons condition us to respond to smiles and laughs. "Research shows that when people are in a good mood at work, it builds emotional capital and enhances productivity," Goleman says. "The art of leadership is getting work done well through other people, and laughing together is one of the best ways to do that."

Swanson never intended to publish a management book, which explains why you won't find this text in any store. The only reason it's in print at all is that a number of people who saw his PowerPoint talk later asked for copies of the presentation. The sayings of Chairman Swanson began with a modest first printing of 500 copies last year. After several reprintings, more than 10,000 copies have now been distributed to executives who liked what they read and requested more to give away.

One of those gift copies made its way to the Sage of Omaha when FlightSafety's Whitman sent a copy to his boss, Buffett. "This is really one of the best books I've seen," Buffett later wrote in a letter to

Swanson. He wasn't just being nice. Says NetJets chairman Richard Santulli, "In all the years I've worked for [Buffett], this is the first time he's ever sent a book to read."

So where can you get your copy? Until now, you had to know an insider to learn the unwritten rules. We got our hands on the book, though, and asked Swanson to elaborate on a dozen of the best parts. It took the better part of a lifetime to get these thoughts on paper, but at last his secret rules are accessible to the rest of us. — PAUL KAIHLA

LEARN TO SAY "I DON'T KNOW." IF USED WHEN APPROPRIATE, IT WILL BE USED OFTEN.

How many times have you been in a meeting with someone who felt compelled to contribute, even though he obviously had no idea what he was talking about? In those circumstances, silence is golden. As a CEO, you know that everyone wants to impress you, so I sometimes ask a question to which I already know the answer as a way to test someone's character. Confident people know their strengths and weaknesses, and they don't try to b.s. you. You are not expected to know the answer to everything. Smart people simply say "I don't know"—and go get an answer.

YOU REMEMBER 1/3 OF WHAT YOU READ, 1/2 OF WHAT PEOPLE TELL YOU, BUT 100 PERCENT OF WHAT YOU FEEL.

If a parent tells a young child not to touch a lightbulb, the child generally won't remember. But after the first time he touches a lightbulb, he'll never forget that it's hot. A leader needs to communicate in a way that makes people feel what they need to do. I was reminded of this a couple of years ago during a visit to Nellis Air Force Base. I introduced myself to a pilot, and he looked me in the eye and said, "If it wasn't for what you all do, I wouldn't be here today." A missile had been launched at his F-15, but we make a decoy, which he deployed. The decoy didn't come home—but he did, to his family. I use that feeling to remind everyone that people's lives depend on the reliability of our products.

NEVER DIRECT A COMPLAINT TO THE TOP; A SERIOUS OFFENSE IS TO "CC" A PERSON'S BOSS ON A COPY OF A COMPLAINT BEFORE THE PERSON HAS A CHANCE TO RESPOND.

I learned this in the 1970s—long before e-mail. I'd graduated from Cal Poly San Luis Obispo and was working on antennas and microwave assemblies at Raytheon's Santa Barbara facility. We had a manager and seven young engineers on the team, so we were called Snow White and the Seven Dwarfs. I was one of the dwarfs. One of the others wrote a complaint to a supervisor outside the team, and cc'd the world on his letter. That made a lot of people angry—it was a big mess. With e-mail, of course, this problem has only gotten worse. If you have a complaint, take it directly to the relevant individual, privately and professionally, to give him or her a chance to work it out. You'll lose respect if you write one of these cc'd zingers, and, even worse, that kind of behavior sucks the energy out of an organization. Conflict adds no value.

TREAT THE NAME OF YOUR COMPANY AS IF IT WERE YOUR OWN.

My father always said, "You were given a good name when you came into this world; return it the way you got it." A company's reputation is built on the actions of each employee. I spend a lot of time emphasizing ethics and integrity, but I humanize those issues by asking people to treat the Raytheon name the same way they do their family name. Anyone who would bring embarrassment to our name should find work somewhere else.

HAVE FUN AT WHAT YOU DO. IT WILL BE REFLECTED IN YOUR WORK. NO ONE LIKES A GRUMP EXCEPT ANOTHER GRUMP!

We all spend plenty of hours at work. It's much more pleasant to spend those hours with people who have a bounce in their step and a smile on their face than with those who mistakenly associate professionalism with a dour disposition. I don't like being around depressing people because they make me depressed. The best managers give of themselves by having fun at what they do—and I look for that in those around me.

IF YOU ARE NOT CRITICIZED, YOU MAY NOT BE DOING MUCH.

When someone assumes a position of responsibility for the first time, it's common to avoid decisions—and the risk of criticism. But that only creates different risks. Problems are not like wine and cheese; they don't get better with age. In 1998 we undertook the largest rationalization in the history of our industry. We closed a third of the company's square footage and let go more than 25 percent of our 90,000 workers. We had five missile plants. We now have one. I know that many people were hurt by the consolidation. But if we hadn't done it, Raytheon might be out of the missile business today. Instead, we've become a $20 billion powerhouse.

WHEN SOMETHING APPEARS ON A SLIDE PRESENTATION, ASSUME THAT THE WORLD KNOWS ABOUT IT AND DEAL WITH IT ACCORDINGLY.

When people assure you that proprietary or confidential information you are looking at on the screen will never leave the room, assume that it already has. In fact, you should assume that it will be published in the New York Times, the Los Angeles Times, or the Washington Post. My first experience with this was a funny one involving a small local paper. The roof of our Andover, Mass., plant was resurfaced with a white membrane. It must've reminded seagulls of a beach, because they liked to leave garbage up there. My guys showed me a slide presentation that included a picture of a dead seagull in the report. Twenty-four hours later, it showed up in the local newspaper. They claimed that we were poisoning seagulls, which wasn't true. It taught me a valuable lesson: Always assume that the four or five people briefing you have already talked to four or five people—and that the circle of people in the know already includes at least 40 others.

WHEN FACING ISSUES OR PROBLEMS THAT ARE BECOMING DRAWN OUT, "SHORT THEM TO GROUND."

This metaphor comes out of my engineering training. "Shorting issues to ground" means finding the quickest path from problem to solution. If you sense that your organization is spending more time on the bureaucracy of problem-solving than on actually solving problems, it's time to simplify the process. This came up when my division was developing the Patriot air defense system in the 1980s. We were having problems with the radar, and there were lots of meetings and reports but no solutions. I shorted the issue to ground by going down to the shop floor and talking to the people who had soldering irons and circuit boards in their hands. In the end we were able to eliminate weeks from the product's test cycle.